In the past, market watchers have reacted to that situation with concern. Here's why.« Pasinex Resources: Taking… Will Potential Nyrstar Zi… » The current uncertainty surrounding LME zinc stocks created an interesting situation at the beginning of October: lead began trading at a premium to zinc for the first time since June 2014. In the past, market watchers have reacted to that situation with concern. The two metals are often found and mined together, and while that’s not normally an issue, it can be when one metal is faring better than the other. The problem with by-productsTo explain why such activity can be concerning, analyst John Kaiser of Kaiser Research has used the copper and moly markets as an example. “The biggest downside threat to molybdenum prices lies with the giant Chilean copper deposits where adding a molybdenum recovery circuit is an afterthought easily made [when copper is doing well],” he has pointed out. The result is that “molybdenum gets produced regardless of the molybdenum price once the initial decision to add the capacity has been made.” Get Our Expert Guide to Zinc Investing FREE! Download this FREE Special Report, Zinc Commodity News and Zinc Market Outlook 2015.In the case of zinc and lead, market participants have worried in that past that a higher lead price might result in higher production of that metal, as well as zinc. And for good reason — in 2012, five of the seven zinc mines that came online worldwide were also significant lead producers. That said, that issue is reportedly becoming less prominent. According to a 2013 CRU Group study, only about 20 percent of the 50 zinc projects being developed at that time contained lead as a by-product. In addition, zinc was seen developing links with other markets — most notably precious metals. LME zinc stocks the issue?Perhaps reflecting those trends, the recent lead premium is instead interesting because, as mentioned, it reflects the uncertainty surrounding LME zinc and lead stocks. Specifically, the zinc price has fallen on the back of rising LME zinc stocks at warehouses in New Orleans. However, according to Reuters’ Andy Home, the metal coming to New Orleans is actually “metal that was moved earlier this year to off-exchange storage now coming back into LME-registered sheds.” That means “[s]entiment … is being driven by what is largely storage arbitrage, irrespective of whose metal it is.” Meanwhile, market watchers have been encouraged by lower LME lead stocks, which fell as LME zinc stocks rose. But again, Home believes that fluctuations in LME lead stocks are also not necessarily to taken at face value. “[T]he key take-away here is that neither LME zinc nor lead stocks are saying anything particularly useful about underlying market conditions right now,” he states in a recent article. InZinc Mining Ltd. (TSXV:IZN) has one of the best located and larger undeveloped zinc resources located in Utah and PEA results suggest it has the potential to be the highest returning (23% IRR after tax) zinc project within peer group. Connect with InZinc Mining to instantly receive their next catalyst. The upshotHome concludes that lead’s premium over zinc is currently “small and tentative,” noting at the same time that “[t]he jury seems very much out on how the lead-zinc relative value trade is going to play out over the coming months with no clear consensus among analysts.” Glencore’s (LSE:GLEN) October 8 announcement that it plans to cut its annual zinc output by 500,000 tonnes and its lead production by 100,000 tonnes will likely only add to that confusion. Home’s article was written before the major miner dropped that bomb, and while the lead price was still slightly higher than the zinc price later in the month, and about level with it heading into November, it’s tough to say what impact the news may have longer term. For investors, one key takeaway seems to be to remember not to take information about LME zinc and lead stocks at face value. Another, at least for Home, is to keep in mind the broader picture: zinc and lead are stuck in an “ugly contest,” not a beauty contest, and neither has neared its supercycle peak in nearly a decade — investors should thus perhaps be wary of expecting sudden large moves from either metal. Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article. Related reading: Charlotte McLeod • November 3, 2015 original story: http://investingnews.com/daily/resource-investing/base-metals-investing/zinc-investing/lme-zinc-stocks-lead-price-glencore/?nameplate_category=Zinc%20Investing
0 Comments
Dec 7 Belgium's Nyrstar NV said on Monday it was suspending operations at another mine as it seeks to reduce cash consumption in the face of weak zinc prices.
The company, the world's largest zinc smelter, said it would place its Middle Tennessee Mines on so-called care and maintenance, resulting in about 50,000 tonnes of zinc in concentrate being taken out of the market. Zinc metal production at Nyrstar's nearby Clarksville smelter would be reduced by about 7 percent, equivalent to some 9,000 tonnes per year. It would continue to be supplied by East Tennessee Mines and elsewhere. "We continue to take decisive action to reduce spending in our mines, and further mine operation suspensions may be necessary if the depressed metals price environment continues," Nyrstar chief executive Bill Scotting said in a statement. Nyrstar said last month it would consider cutting zinc concentrate output by 400,000 tonnes if prices remained depressed. That would be on top of 100,000 tonnes removed by the earlier suspension of its Myra Falls operations in Canada and Campo Morado operations in Mexico, it said. Zinc three-month forward prices are hovering around six-year lows and are down a third since early May. Nyrstar has also announced plans for a rights issue of 250-275 million euros ($272-299 million) to shore up its balance sheet and said it could even exit its poorly performing mining business. "We expect to complete the process to divest the majority or all of our mines over the course of 2016," Scotting said on Monday. ($1 = 0.9206 euros) (Reporting by Philip Blenkinsop; Editing by Mark Potter) Read more at Reutershttp://www.reuters.com/article/nyrstar-mines-idUSL8N13W0UE20151207#J7HwHReZybhTqZLe.99 Ireland (Other OTC: IRLD - news) is feeling the strain as Europe's largest producer of zinc with global prices for the metal plummeting due to an economic slowdown in China and surplus supply on world markets. The country's second largest mine is shutting down with the loss of 370 jobs because the zinc is running out and Indian owners Vedanta Resources Group have no plans for further production. Set in a region with few other employment opportunities in rural southern Ireland, Lisheen Mine has been in operation since 1999. "Mining operations will cease at the end of November, and the milling operations will cease during December," Vedanta said in a statement to AFP. "There was a lot of expectation we'd get another few years," Tim Bergin, a worker in the mine for the past 15 years, told AFP. "Up until last year even, there was a hope they would drill out, find more and they might extend it," he said. "But it's closing. That's it." Its closure will leave Tara, Europe's largest zinc mine, as the only active zinc extraction point in Ireland, accounting for 150,000- 200,000 tonnes a year. Tara, owned by Swedish company Boliden (Other OTC: BDNNF - news) , is expected to continue production until 2019. Analyst Caroline Bain at Capital Economics, a research consultancy, said: "Given the current price environment I can't envisage a new project." Zinc prices have fallen by almost 30 percent this year to six-year lows and earlier this month dropped temporarily below the $1,500 per tonne threshold. "Ireland was the 10th producer of zinc in the world, as well as the largest in Europe, with 300,000 metric tonnes of zinc mined in 2014," said Justas Gedvilas, industry analyst at Euromonitor International. The country was responsible for 2.2 percent of global output and 28 percent of European output in 2014. The closure of Lisheen will almost halve Ireland's zinc output and reduce global supply by 1.2 percent. "Yet the closures should not have a huge effect on the overall Irish economy as mining contributes only 0.02 percent of Irish GDP (gross domestic product)," Gedvilas said. - More reserves to explore - Zinc is a metal traditionally used to galvanise steel to protect it from corrosion but is also used in construction, electronics and to make batteries. Analysts said a reduction in supply could push up the global price of zinc somewhat, but mainly due to the depletion of larger sources such as Century (Shenzhen: 300078.SZ - news) in Australia, which is also due to close this year. "Other mines are closing elsewhere so it is playing a part in the general picture of a tightening supply outlook," said Bain. The Lisheen plant, which is surrounded by bog and farm land, stepped up its wind-down in the last eight months, with the workforce dwindling as the final day of production draws closer. Staff member Pat Hynes, 53, predicted he will have to commute to find work once he loses his job, even suggesting he may have to go to Britain. "There aren't many mining jobs in Ireland. There's certainly nothing around here." A number of companies, including Glencore (Xetra: A1JAGV - news) and Vedanta, are exploring other prospecting licence areas for lead and zinc in Ireland even though current prices are hardly encouraging. "The reserves of zinc ore in Ireland are yet far from explored," said Gedvilas, adding that the Irish midlands were "one of the most important ore fields of zinc and lead of the world". By Conor Barrins | AFP – Sun, Nov 29, 2015 original story at https://uk.news.yahoo.com/tumbling-zinc-prices-hit-corner-032942974.html#7IpKZ0v |
Details
Archives
June 2016
Categories
|